PERTH (miningweekly.com) – ASX-listed Develop will raise A$50-million to fund the A$100-million acquisition of the Woodlawn copper project, in New South Wales.
Develop has struck a multimillion-dollar deal to acquire the Woodlawn underground mine and processing plant, which was developed by embattled Heron Resources, which entered into voluntary administration in July last year.
Heron had previously invested A$340-million into the project before it was placed on care and maintenance in 2020.
Under the terms of the agreement, Develop has entered into binding cooperation deeds with Orion, Nomad and Castlelake who jointly hold in aggregate more than 50% of the value of the total claims against Heron, pursuant to which those creditors have agreed to vote in favour of the deed of company arrangement proposed by Develop (DOCA) pursuant to which Develop will acquire Heron.
The acquisition will consist of an upfront consideration of A$30-million, payable to Heron’s creditors, comprising a A$15-million cash payment and A$15-million shares in Develop, at an issue price of A$3.14 a share.
A further A$70-million in cash or Develop shares will also become payable to Orion, subject to certain milestones being met. The first A$12.5-million will become payable on the definition of a 550 000 t zinc-equivalent underground Joint Ore Reserves Committee- (Jorc-) compliant reserve, with a further A$7.5-million payable on the definition of a 680 000 t zinc-equivalent underground Jorc reserve.
A further A$20-million will become payable on a positive final investment decision on the Woodlawn project, with a further A$30-million payable within 18 months of continuous commercial production being reached.
The existing Nomad stream arrangement over Woodlawn will remain in place, subject to the following changes: that the aggregate amount of silver to be delivered to Nomad will be capped at A$27-million, and that a secondary stream will be introduced in respect of tailings, under which Tarago Operations, at the hands of Develop, will pay A$1-million for every one-million tonnes of tailings ore processed at a certain tenement at Woodlawn, capped at A$10-million.
Develop MD Bill Beament on Thursday told shareholders that Woodlawn was an exceptional acquisition opportunity.
“Such outstanding acquisition opportunities are extremely rare. “Woodlawn hosts future-facing metals in a tier-one location and meets all our criteria for creating shareholder value.
“It is a substantially-developed project with extensive underground infrastructure and a new processing plant. The previous owners invested some A$340-million to re-establish the operation.
“The geology is first-class, with a VMS system which is under-explored and open in a number of areas. We are very confident that we will be able to grow the inventory rapidly by extending the key lenses using underground drilling.
“The potential to create value for our shareholders through inventory growth is enormous.
“Woodlawn also provides us with a valuable opportunity to further leverage Develop’s team of underground mining specialists, which is a key plank of our growth strategy.”
Woodlawn has historically produced 13.8-million tonnes of ore at 19.7% zinc equivalent between 1978 and 1998, when it was closed owing to depressed commodity prices and insufficient drilling to extend known mineralisation.
Heron began redeveloping Woodlawn in 2017. However, the company encountered ramp-up challenges and Covid-related issues in 2020, coupled with a corporate strategy that was not suited to this type of operation. As a result of these factors, the project was placed on care and maintenance in 2020.
Develop’s growth strategy for Woodlawn is to aggressively grow the underground mining inventory over the 24 to 36 months by investing in 1 000 m of underground development to establish multiple drilling platforms and to subsequently complete a 33 000 m underground diamond drilling programme targeting lens extensions, untested electromagnetic conductors and additional mineralised horizons. Develop is ultimately aiming to define a robust high-grade seven- to ten-year underground mining inventory, ahead of a potential restart of operations.
The company said that the combination of Woodlawn and Develop’s rapidly emerging Sulphur Springs copper/zinc/silver project in the Pilbara will transform the company into a major base metals group centred on future-facing metals in tier-one locations.
To fund the transaction, Develop would undertake a fully underwritten A$50-million equity raising, consisting of an institutional placement of 7.6-million shares, to raise an initial A$25-million, and a 1-for-18.6 pro-rata accelerated non-renounceable entitlement offer of a further 7.6-million shares to raise a further A$25-million.
The equity raising will be priced at A$3.30 a share, representing a 5% premium to the five-day volume weighted average share price for the period ending February 16.
Beament and shareholder Mineral Resources, which hold a 16% and a 15% respective interest in the company, will take up their full entitlements in the equity raise, totalling A$8-million.